In a stunning turn of events, Russia’s economy is expected to grow by 3.2% in 2024, surpassing growth rates predicted for major advanced economies such as the US. Despite being in a state of war, high levels of investment and strong private consumption have propelled Russia’s economy forward. This forecast has surprised many in Western countries who had hoped that imposing sanctions on Russia would severely hinder its economy and put pressure on Putin’s government.
Russia’s energy sector has remained resilient, with sustained exports of oil and commodities to major markets such as India and China. By avoiding the oil price cap set by G-7 countries, Russia has been able to continue exporting energy at strong levels. The country’s steadfastness against Western sanctions can be attributed in large part to its strong partnership with China. Trade between the two countries hit a record high of $240 billion last year, driven by China’s demand for essential Russian commodities that have been discounted due to the West’s reluctance to engage in trade with Russia.
As foreign companies pull out of Russia due to the war in Ukraine, the government in Moscow has been seizing funds from these fleeing firms, with reports indicating they have taken $387 million as of mid-March. Despite this setback, Russia has managed to maintain its economic momentum through high levels of investment and private consumption. This has validated Putin’s claims that Russia has been able to withstand the effects of Western sanctions and trade restrictions.
The International Monetary Fund (IMF) anticipates that this momentum will slow down in 2025, with Russia’s growth rate dropping to 1.8%. However, even then, it expects that Russian economy will continue growing at a steady pace over the coming years thanks to its energy sector and strategic partnerships like that with China. This forecast is likely to put more pressure on Western governments who imposed sanctions on Russia as they realize their efforts may not be effective in hindering economic growth or achieving their political goals.